Texas made a school district take in more students. But will it help fund them?

As lawmakers debate possible reforms to the school finance system this week, they might decide whether to continue offering extra funds to districts like Texas City ISD, which last year was forced to annex a struggling district next to it.

TEXAS CITY — Over the past couple of months, Texas City ISD Superintendent Cynthia Lusignolo has driven from her coastal industrial city to the state Capitol to meet with lawmakers and fight to keep one program entrenched in the state’s messy school finance system.

Additional State Aid for Tax Reduction, or ASATR, provides her Galveston Bay district with millions of dollars each year — and it’s set to expire in September. For Lusingnolo and her team, those millions mean more money to fix crumbling buildings and help a high-need student body that increased by nearly 40 percent last year.

That’s because Texas City ISD was forced by the state to annex neighboring La Marque ISD, which had seen declining enrollment and test scores for years. The annexation moved about 2,500 former La Marque students — mostly low-income and black, with high academic and social needs — into Texas City’s district.

But the state might not give Texas City ISD the money its administrators say they need to help all those new students.

The struggle comes as lawmakers are debating how, or whether, to reform a beleaguered school finance system that has faced lawsuits for decades amid criticism that it inequitably distributes funds to districts and fails to provide schools with enough money to meet state standards. The House could vote on a major bill to tweak the system as soon as Wednesday.

The program Lusignolo wants the state to preserveis a large part of that debate this legislative session. Most experts agree that the program is inefficient, overly complex and benefits some school districts unfairly, contributing to inequalities in school funding around the state.

It was born after the Texas Supreme Court ruled the school finance system unconstitutional in 2005. The Legislature decided to slash local property tax rates by one-third, and to make up the difference in school funding, lawmakers created ASATR, which guaranteed school districts at least the same amount of funding they received in the 2005-06 school year. It was just the latest of the many stopgap measures the state has used to hold a patchwork system together for decades.

The system has become so convoluted that even as Texas City ISD receives ASATR payments that have made up as much as 30 percent of its revenue, the district has also paid as much as $14 million per year to the state under Texas’ Robin Hood system, which requires districts that collect more local property tax revenue to subsidize those with much less.

This year, district officials say the roughly $11 million they’ve received from ASATR makes up 16 percent of their revenue — a year after sending the state $1.4 million under Robin Hood.

That one district can simultaneously be paying millions of dollars to the state under one provision of school finance law while drawing down supplemental payments from another underscores why school finance reform advocates think these kinds of supplemental payments should be abolished in favor of a more equitable school finance system.

Without the money they get from ASATR, Texas City ISD and other small, vulnerable districts throughout Texas say they might not be able to survive.

“If the state eliminates [the program], that’s more than an error. That’s an ethical and moral wrong that kids are going to pay for,” Lusignolo said.

For lawmakers trying to reform the school finance system, the fight over this program adds another layer of complication as they debate whether it’s possible to make broad reforms that don’t hurt districts, like Texas City ISD, that face special circumstances.

"I mean, they got every problem under the sun," top House education leader Rep. Dan Huberty, R-Houston, said of Texas City ISD at a March committee hearing. "We got to figure out how to deal with that."

Annexation brings hope, challenges

By some definitions, Texas City ISD is flush with resources thanks to the heavy industry and petrochemical refining that underlie the local economy. A massive industrial campus sits adjacent to Galveston Bay, and companies such as Dow Chemical, BP and Valero all have large operations within the district’s boundaries.

For Lusignolo, convincing lawmakers to extend the state aid program past September is the key to getting all former La Marque ISD students up to the same academic standards as her other students — instead of having them fall further behind.

Annexation is an unemotional, technical word for the change that Lusignolo and her team faced: They were suddenly in possession of 24 additional buildings, the former district’s accounts and debts, as well as a larger tax base of residents and businesses.

But the process brought up feelings of fear and anger on both sides about how students and communities would fare. More than half of the teachers, administrators and support staff at La Marque ISD lost their jobs once that district ceased to exist.

“We’re Cougars and Stings. We’re all one,” Lusignolo said. But they still function as separate entities. La Marque residents are still zoned to schools that once belonged to La Marque ISD, and Texas City residents to former Texas City ISD buildings.

Before it was forcibly annexed, La Marque ISD received low ratings from the state for failing to prepare its students for graduation. Virtually no La Marque ISD student took Advanced Placement tests, and none passed them. The average La Marque ISD student was scoring more than 200 points lower on the SATs than the state average. Enrollment was tanking as families had been fleeing for years.

Texas City ISD, for all its financial woes, was doing better, with average SAT scores last year hovering just below the state average and 38 percent of its 2015 graduates considered college ready in English, compared to 42 percent statewide.

A majority of its students were Hispanic and white, most of them poor. In the annexation, Texas City ISD absorbed a student population that was mostly black and even poorer. The state gave the district three years to get most former La Marque students passing state exams and on track to graduate.

“Our academic challenges at this point in time in the history of our district have never been greater,” Lusignolo said. “We’ve got to get those kids up to the level of academic performance that they expect of themselves and that the state expects of them. So that takes resources.”

Texas City ISD cannot raise local property taxes to squeeze more school funds out of its residents and businesses because it’s currently taxing at the highest local rate allowed by state law. Lusignolo makes the case that she needs that $11 million of ASATR money to do things like start pre-K students at former La Marque ISD schools on the right foot — by funding a full-day pre-K program, instead of the current half-day program.

And she wants to see more students like Myritha Lenor graduate.

Lenor, an 18-year-old La Marque High School senior, said being handed over to Texas City ISD was a relief.

“I was sad, but I was happy at the same time,” she said. “Without Texas City ISD, we wouldn’t be able to do nothing. La Marque would have had us going down the drain. It would have went right down the drain.”

Lenor said she was “way behind” in her English and math end-of-course exams. She spent time in classes talking to other students, “playing around,” she said. “I felt like nobody cared.”

Now she spends four hours a day in Texas City ISD’s “Challenge Academy,” aimed at getting students who are at risk of aging out of high school without graduating on the right track. She also works 22 hours a week at Sears. She is finished with her math exams and is on track to graduate at the end of the school year.

Students like Lenor are what make getting extra state money more than a matter of principle for Lusignolo and her team. “See, this is what happens when there’s not enough money and the state starts cutting: They pit districts against districts,” she said. “It’s dangerous.”

Can lawmakers fix school finance?

More than a decade after creating ASATR, some lawmakers have returned to the task of trying to reform the school finance system — without a mandate from the state Supreme Court, which last year upheld the system as constitutional.

The charge to fix it is being led in the Texas House by Huberty, its top education leader, who proposed a bill that would inject $1.6 billion into public education, increase funding for most districts and streamline the school finance formula. That bill is expected to get a hearing in the House on Wednesday.

Without any action by the Legislature, ASATR funding is set to expire in September. The number of districts depending on it has fallen off drastically in the past decade, but about 250 or so small districts still receive payments, according to state officials. ASATR's critics argue that school districts still dependent on the program didn't do enough to wean themselves off the funding stream.

Huberty’s proposal would replace ASATR with a two-year “hardship grant” program to keep financially struggling districts from plummeting down a funding cliff. But the grant program contains roughly half the current funding ASATR provided this year, and the bill still leaves about 5 percent of districts worse off, putting it on shaky political ground.

Without getting rid of the state aid program, legislators would have a hard time making the finance system fairer, said Mike Moses, a former Texas education commissioner who served as superintendent of La Marque ISD for a few years in the 80s.

“It’s akin to trying to repair an airplane while you’re going down the runway,” Moses said. “It’s pretty difficult.”

The only way out is for Texas lawmakers to pump enough state money into the system so that no district ends up losing money, he said. But that’s a nonstarter at the Capitol, where lawmakers last session cut taxes and reduced state revenue available to public schools and other priorities by about $4 billion.

What no one can reconcile is how Texas should go about creating a fair and equitable system for doling out money while also making sure no school district ends up a financial loser.

“If I’ve got to vote to make some of my districts winners and some of my districts losers, I don’t want to take that vote,” Moses said.

Lynn Moak, a former state deputy education commissioner, said legislators have a long history of using programs like ASATR to make school finance reforms acceptable to the losing districts. They’re often “a necessary step to getting the overall bill passed,” he said.

State Rep. Wayne Faircloth, a Galveston Republican whose district includes Texas City, told The Texas Tribune he was skeptical that Huberty’s plan would address the school district’s financial needs.

“If you want them to right the ship ... we need to provide them with resources,” he said. “Otherwise you’re keeping kids in the same position as they were before the annexation, when the whole point was to elevate [La Marque ISD].”

Decaying buildings, lost jobs

ASATR, which cost more than $400 million this year alone statewide, doesn’t seem likely to live past its expiration date. Though a few legislators have filed proposals to extend the program, many lawmakers have suggested they don’t have the votes.

No matter what direction lawmakers choose, school finance reform advocates hope it brings the state toward a system that treats school districts fairly.

“I think getting away from school finance as being something that happens in fits and starts and major shocks every 10 years and toward a system where there’s the expectation that this takes a constant recalibration — that would overall be the healthiest thing that they could do,” said Harrison Keller, a professor at the University of Texas LBJ School of Public Affairs and a former education policy analyst for the Texas House. “Then you wouldn’t find that a decade later there are districts that have been systematically advantaged or disadvantaged.”

In the meantime, Lusignolo and her team are doing as much as possible while they still have the money. Texas City ISD spent several million dollars to get the buildings it acquired from La Marque ISD in safe condition for the school year. The estimated cost to replace three schools: $100 million.

Jerry Franklin, who now heads maintenance for Texas City ISD, highlighted the need for new buildings, stopping in one La Marque Middle School classroom where soggy tiles had separated from the foundation. He has spent the past 27 years working against time and gravity to keep La Marque’s crumbling buildings intact — a difficult task since those buildings are at least five decades old.

When Texas City ISD acquired the middle school building, the gutters didn’t work, the security system was nonexistent and the lawn was infested with ants. Water had seeped under discolored classroom floor tiles and into the walls, at least one of which had been at risk of collapse before a recent renovation. A few buildings are unusable, riddled with asbestos.

Franklin had spent decades working alongside many colleagues who were let go after the annexation and didn’t get jobs with Texas City ISD.

“I was one of the fortunate ones, which I’m grateful for. Others who didn’t, who had families — it makes it hard,” he said.

A lifelong La Marque resident and graduate of the defunct school district, Franklin now wears a logo on his blue staff button-down that combines both districts’ mascots; the tail of La Marque’s cougar curves above the right side of Texas City’s stingray.

There’s hope for Texas City ISD’s finances down the line. A major petrochemical corporation earlier this year signed a lease agreement with the city for a 1,000-acre site, where it will potentially develop a multibillion-dollar facility to export natural gas, the first in the region. In the next several years, that could mean millions in additional money for the district.

“If those new manufacturing industries locate in Texas City, we’ll be out from under ASATR at that point,” Lusignolo said. “The state will be there with the hand out when our property values come up, I promise you.”

Disclosure: Lynn Moak has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.

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